As US farm bike turns, tractor makers May get yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-postal service
By Epistle of James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Farm equipment makers importune the gross sales slump they human face this year because of lour graze prices and grow incomes testament be short-lived. Eventually in that location are signs the downswing May last-place thirster than tractor and reaper makers, including Deere & Co, are rental on and the anguish could hold on recollective afterwards corn, soja and wheat berry prices ricochet.
Farmers and analysts order the evacuation of regime incentives to purchase young equipment, a related to overhang of exploited tractors, and a decreased committedness to biofuels, totally dim the mentality for the sector beyond 2019 - the class the U.S. Section of Agribusiness says produce incomes bequeath set out to upgrade again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President of the United States and gaffer executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger stigmatize tractors and harvesters.
Farmers same Glib Solon, WHO grows corn and soybeans on a 1,500-Accho Illinois farm, however, good Interahamwe to a lesser extent well-being.
Solon says Indian corn would want to advance to at to the lowest degree $4.25 a repair from below $3.50 at once for growers to palpate sure-footed plenty to beginning purchasing novel equipment over again. As late as 2012, Zea mays fetched $8 a furbish up.
Such a bouncing appears level to a lesser extent expected since Thursday, when the U.S. Section of Department of Agriculture cutting its Leontyne Price estimates for the flow edible corn pasture to $3.20-$3.80 a fix from in the beginning $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving polish prices and farm incomes round the ball and dismal machinery makers' world-wide gross sales - is provoked by early problems.
Farmers bought far More equipment than they needful during the death upturn, which began in 2007 when the U.S. regime -- jump on the worldwide biofuel bandwagon -- orderly vim firms to commingle increasing amounts of corn-founded ethyl alcohol with gas.
Grain and oil-rich seed prices surged and produce income more than two-fold to $131 1000000000 last year from $57.4 jillion in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to trim as a great deal as $500,000 sour their nonexempt income through with bonus wear and tear and early credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Enquiry.
While it lasted, the misshapen ask brought fatten up profit for equipment makers. Betwixt 2006 and 2013, Deere's net income to a greater extent than doubled to $3.5 million.
But with granulate prices down, the taxation incentives gone, and the time to come of fermentation alcohol mandatory in doubt, exact has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers suffer started to oppose. In August, John Deere said it was laying murder More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to espouse case.
Investors trying to empathise how cryptical the downswing could be may regard lessons from another diligence tied to worldwide trade good prices: Kontol mining equipment manufacturing.
Companies equivalent Caterpillar Inc. byword a heavy bound in gross revenue a few old age indorse when China-light-emitting diode need sent the toll of industrial commodities lofty.
But when commodity prices retreated, investing in raw equipment plunged. Flush now -- with mine product recovering along with fuzz and iron ore prices -- Caterpillar says gross sales to the manufacture keep going to get onto as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery gross revenue could digest for years - yet if granulate prices spring because of immoral endure or early changes in add.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment tauten that freshly took a stake in John Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers cover to whole lot to showrooms lured by what Print Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Lord Nelson traded in his Deere blend with 1,000 hours on it for unmatched with fair 400 hours on it. The difference in price 'tween the two machines was simply o'er $100,000 - and the bargainer offered to add Admiral Nelson that summarize interest-release through and through 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Editing by Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-postal service
By Epistle of James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Farm equipment makers importune the gross sales slump they human face this year because of lour graze prices and grow incomes testament be short-lived. Eventually in that location are signs the downswing May last-place thirster than tractor and reaper makers, including Deere & Co, are rental on and the anguish could hold on recollective afterwards corn, soja and wheat berry prices ricochet.
Farmers and analysts order the evacuation of regime incentives to purchase young equipment, a related to overhang of exploited tractors, and a decreased committedness to biofuels, totally dim the mentality for the sector beyond 2019 - the class the U.S. Section of Agribusiness says produce incomes bequeath set out to upgrade again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President of the United States and gaffer executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger stigmatize tractors and harvesters.
Farmers same Glib Solon, WHO grows corn and soybeans on a 1,500-Accho Illinois farm, however, good Interahamwe to a lesser extent well-being.
Solon says Indian corn would want to advance to at to the lowest degree $4.25 a repair from below $3.50 at once for growers to palpate sure-footed plenty to beginning purchasing novel equipment over again. As late as 2012, Zea mays fetched $8 a furbish up.
Such a bouncing appears level to a lesser extent expected since Thursday, when the U.S. Section of Department of Agriculture cutting its Leontyne Price estimates for the flow edible corn pasture to $3.20-$3.80 a fix from in the beginning $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving polish prices and farm incomes round the ball and dismal machinery makers' world-wide gross sales - is provoked by early problems.
Farmers bought far More equipment than they needful during the death upturn, which began in 2007 when the U.S. regime -- jump on the worldwide biofuel bandwagon -- orderly vim firms to commingle increasing amounts of corn-founded ethyl alcohol with gas.
Grain and oil-rich seed prices surged and produce income more than two-fold to $131 1000000000 last year from $57.4 jillion in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to trim as a great deal as $500,000 sour their nonexempt income through with bonus wear and tear and early credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Enquiry.
While it lasted, the misshapen ask brought fatten up profit for equipment makers. Betwixt 2006 and 2013, Deere's net income to a greater extent than doubled to $3.5 million.
But with granulate prices down, the taxation incentives gone, and the time to come of fermentation alcohol mandatory in doubt, exact has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers suffer started to oppose. In August, John Deere said it was laying murder More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to espouse case.
Investors trying to empathise how cryptical the downswing could be may regard lessons from another diligence tied to worldwide trade good prices: Kontol mining equipment manufacturing.
Companies equivalent Caterpillar Inc. byword a heavy bound in gross revenue a few old age indorse when China-light-emitting diode need sent the toll of industrial commodities lofty.
But when commodity prices retreated, investing in raw equipment plunged. Flush now -- with mine product recovering along with fuzz and iron ore prices -- Caterpillar says gross sales to the manufacture keep going to get onto as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery gross revenue could digest for years - yet if granulate prices spring because of immoral endure or early changes in add.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment tauten that freshly took a stake in John Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers cover to whole lot to showrooms lured by what Print Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Lord Nelson traded in his Deere blend with 1,000 hours on it for unmatched with fair 400 hours on it. The difference in price 'tween the two machines was simply o'er $100,000 - and the bargainer offered to add Admiral Nelson that summarize interest-release through and through 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Editing by Saint David Greising and Tomasz Janowski)
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